1980 (4) TMI 16 - HC - Income Tax

Excess Profits Tax, Limitation, Reassessment, Removal Of Bar Of Limitation, Representative Assessee

Issues Involved:
1. Validity of the assessments of M/s. John Mills and Company under Section 34 of the Indian I.T. Act for the assessment years 1942-43 to 1947-48 and the recovery proceedings for the tax assessed.
2. Validity of the assessments of M/s. John Mills and Company under Section 15 of the Excess Profits Tax Act for the years 1942-43 to 1946-47 and the recovery proceedings for the tax assessed.
3. Validity of the recovery proceedings for the income-tax assessed against John and Company for the years 1948-49 to 1956-57.

Detailed Analysis:

1. Validity of the Assessment of M/s. John Mills and Company under Section 34 of the Indian I.T. Act for the Assessment Years 1942-43 to 1947-48:
The petitioners contended that the reassessment orders for the years 1942-43 to 1947-48 were made without proper service of notice, rendering the proceedings without jurisdiction. The respondents claimed that notices were sent and served, but the court found that the reassessments were made against receivers as representative assessees under Section 41 of the Indian I.T. Act, not against the original partners of the firm. The court concluded that the receivers were not entitled to receive income on behalf of the firm during the relevant assessment years, making the reassessments without jurisdiction. Additionally, the reassessments were barred by time as notices under Section 34(1)(b) were issued beyond the four-year limitation period. Consequently, the court held that the impugned demand for these years was not backed by valid assessment orders and could not be enforced against the petitioners.

2. Validity of the Assessment of M/s. John Mills and Company under Section 15 of the Excess Profits Tax Act for the Years 1942-43 to 1946-47:
The petitioners argued that the reassessments under the Excess Profits Tax Act were without jurisdiction and made without proper notice. The respondents contended that the reassessment orders were valid and that the petitioners should have filed an appeal if aggrieved. However, the court found that the respondents were unable to prove that notices of demand or copies of the reassessment orders were served on any partners of the assessee's firm. As the law requires serving a notice of demand accompanied by the assessment order before recovery, the court held that the recovery proceedings were premature. The court refrained from expressing any opinion on the validity of the reassessment orders, allowing the petitioners to challenge them before the appropriate authority if and when proper notices are served.

3. Validity of Recovery Proceedings for the Income-Tax Assessed Against John and Company for the Years 1948-49 to 1956-57:
The petitioners in Writ Petition No. 523 of 1975 challenged the recovery proceedings for the years 1948-49, 1952-53, and 1956-57, arguing that no notice of demand or copies of the assessment orders were served on them. The respondents failed to provide particulars of the service of such notices. The court accepted the petitioners' plea that the notices of demand and assessment orders were not served on the partners, making the recovery proceedings without jurisdiction. The court clarified that the Revenue could serve the notices and assessment orders on the correct persons and initiate recovery proceedings in accordance with the law. The court did not express any opinion on the validity of the assessment orders, allowing the petitioners to file appeals if proper notices are served.

Additional Observations:
The court also addressed specific claims by the petitioners regarding the refund of rent deposited during the pendency of the writ petitions and the refund of a compulsory deposit made in 1943. The court directed the respondents to refund the rent deposited by the petitioner in Writ Petition No. 562 of 1975 and to re-examine the claim for the refund of the compulsory deposit in light of the court's decision.

Conclusion:
The court quashed the proceedings for the enforcement of the impugned demands and allowed the petitions, subject to the observations made. The petitioners were entitled to their costs in each of the petitions.

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